Speech by Minister Gan Kim Yong at the 39th Singapore Economic Roundtable

Dr. Faizal Bin Yahya, Senior Research Fellow, Institute of Policy Studies,

Mr. Christopher Gee, Deputy Director and Senior Research Fellow, Institute of Policy Studies,

Mr. Ong Sin Beng, Head (EM Asia Economics Research), JP Morgan Chase & Co.,

Mr. Ziad Haider, Global Director (Geopolitical Risk), McKinsey & Company, Singapore,

Distinguished guests,

Ladies and gentlemen.

Introduction

1. Good morning. I am happy to join you today and thank you for giving me the opportunity to share about our economic strategies, in particular Singapore’s approach to navigating the increasingly turbulent global order.

Overview of Global Geoeconomic Developments

2. For the past thirty years since the Cold War, globalisation has benefitted the world. Markets were liberalised and trade flourished. This rising tide lifted many boats, especially small sampans like Singapore.

a. Since the inaugural Singapore Economic Roundtable in 2003, Singapore’s GDP per capita has grown from about S$40,000, to slightly more than S$100,000 in 2023. This is an increase of more than 5 per cent per annum, for 20 years!

3. However, globalisation is at an inflexion point. The Washington Consensus of liberalisation and free markets is being challenged. There are many reasons for this, including the growing role that security plays in driving economic policy.

a. The war in Ukraine and the conflict in the Middle East have compounded supply chain disruptions first triggered by the COVID-19 pandemic, and in turn contributed to global inflation.

b. The battle for economic supremacy among the major powers has caused to a heightened sense of zero-sum competition.

c. Greater volatility and an erosion of trust have led more economies to move away from “just in time” to “just in case”. More economies are now rolling out massive subsidies and grants to attract investments to build up their own domestic production, especially in strategic industries such as semi-conductors and clean energy.

4. These shifts portend a major reorganisation of the global economy:

5. First, a reorganisation of alliances, as countries seek new partners against the backdrop of a changing geoeconomic landscape.

a. Multilateral institutions such as the BRICS bloc of top emerging economies are increasingly seen as alternatives to established global bodies dominated by traditional powers.

b. Foreign investment flows are also becoming more concentrated amongst countries that are geopolitically aligned.

6. Second, a reorganisation of global supply chains. Countries are pursuing de-risking strategies, such as “near-shoring” or “friend-shoring” their supply chains, to enhance their resilience. This bifurcation in economic systems has the potential to exacerbate rivalries and frictions between countries rather than cooperation and partnership.

7. Third, a rebalancing of priorities. In such an environment, economic imperatives are increasingly being weighed against national security considerations. Countries are more ready to pursue policies such as sanctions, export and import controls, investment restrictions, and technology transaction rules, even if this may be at the expense of economic growth.

Singapore’s Approach

8. As a small and open economy, Singapore’s survival will depend on our ability to adapt our economic strategies in response to the changing global landscape and manage the economics-security nexus better than our competitors. This morning, I would like to speak about three strategies, which together, will steady our sampan in these choppy waters.

Expand Connectivity

9. First, we must continue to expand our connectivity to regional and international economies so that we can widen our economic space and ride the wave of global opportunities. Singapore is a small economy, and we cannot afford to turn away from the global market. We also cannot afford to have the global market turn away from us.

a. We will therefore need to continue to support and strengthen the rules-based global trading architecture, by reinforcing key multilateral institutions, such as the World Trade Organisation.

i. An effective and well-functioning dispute settlement system is the cornerstone of a rules-based trading system. This is why Singapore has been a strong supporter of reforming the WTO dispute settlement system.

ii. Our leadership role in the WTO’s Joint Statement Initiative (JSI) on Electronic Commerce also demonstrates our commitment to explore practical and inclusive ways to foster collaboration. Members which are ready and willing to commit to rules on trade-related aspects of electronic commerce can join the JSI. To keep JSI inclusive, the door must remain open for others to come onboard whenever they are ready.

b. At the same time, we must continue to enlarge our network of trading partners and establish new connections with emerging markets.

i. We are already a hyper-connected economy, with 27 free trade agreements with economies accounting for 60 per cent of the global GDP. But we want to do more.

ii. Last year, we signed the Pacific Alliance-Singapore Free Trade Agreement, collectively, the eighth-largest economy in the world, and are in the midst of negotiating the MERCOSUR-Singapore FTA.

iii. These agreements allow our companies to unlock new market opportunities and diversify our supply chains. For example, in recent years, we have seen a greater variety of food-related imports from Latin America, such as pork from Mexico, and we look forward to having more. This has helped to strengthen the resilience of Singapore’s food supply chains.

Seek Out New Areas of Cooperation

10. Second, we must seek out new areas of cooperation. This will allow us to deepen collaboration while also strengthening our relevance as a global business hub.

a. Sustainability is one area where there are interesting opportunities for growth and strong potential for international collaboration. Green financing, carbon services, and trading are some examples of the new industries that we can look forward to in the green economy.

i. Singapore’s Green Economy Agreement (GEA) with Australia, the first of its kind, will facilitate our businesses’ overseas trade and investments in green goods and services, and catalyse businesses to pursue emissions reduction and decarbonisation. We hope that the GEA can be a pathfinder for cooperation in our journey for a sustainable future.

b. The digital economy is continuing to thrive and is another area that holds great potential for like-minded partners to come together and collaborate.

i. The Southeast Asian digital economy is expected to reach US$1 trillion by 2030. To unlock Singapore’s potential in this space, our various Digital Economy Agreements provide international frameworks to foster interoperability of standards. These Agreements will support our businesses’ participation in digital trade and e-commerce.

ii. These common frameworks will grow our digital economy, enabling companies in Singapore to increase their reach to global customers and digitally connect with them more seamlessly.

c. Besides identifying new areas of cooperation, we must also forge new models of collaboration, to respond to shifts in the global economic landscape. The JSI initiative is one example I mentioned.

i. The IPEF Supply Chain Agreement, which allows parties to collaborate on supply chain developments, is an example of how the global community can turn challenges into opportunities, and continue to find “bright spots” of collaboration even amidst growing risks of fragmentation.

Bolstering Domestic Economic Resilience and Security

11. Remaining open to trade and investments continues to be a linchpin of our economic strategy. At the same time, we need to fortify our domestic toolkits to address the increasingly complex operating landscape and strengthen the resilience of our economy.

a. Identifying critical entities crucial to our economy and society and ensuring their continuity will provide investors with confidence that we have adequate and effective provisions to ensure the proper functioning of our economy.

12. Globally, an increasing number of jurisdictions have recognised the importance of safeguarding the ownership and control of such critical entities.

a. Many countries have tightened or introduced measures to screen investments for national security reasons in recent years, with more planning to do so as well. These include traditionally open economies like Switzerland and Ireland.

13. Singapore currently relies on a range of sectoral legislation, to monitor and manage entities in regulated sectors such as telecommunications, banking, and utilities. These tools have served us well and will continue to be important in our overall strategy.

a. However, because of the increasingly complex economic environment, it is important for us to take a broader view on how we can more effectively manage the risks that may arise from some of these critical entities.

14. This is why my Ministry introduced a new Significant Investments Review Bill earlier this week. This Bill will complement existing sectoral legislation by setting out a new investment management framework for critical entities not adequately covered under existing sectoral legislation. As the majority of critical entities are already covered by sectoral legislation, we expect only a handful of entities are expected to be designated under the Bill and be regulated.

15. The Bill has been designed to be business-friendly.  Designation applies to individual entities, rather than whole sectors. It applies to both foreign and local investors. We closely consulted industry representatives to take into account the views and suggestions from businesses and investors.

16. Over the next few weeks, we will be engaging with industry, particularly the entities being considered for potential designation.

a. We will share the details of the Bill and work with them on the implementation details, as well as to address their concerns.

b. After the Bill is passed, a dedicated Office will be set up to implement the legislation and to closely engage businesses and investors. We will ensure that the process is as efficient as possible.

17. It is timely for us to introduce the new Bill amidst a rapidly evolving and increasingly complex operating landscape, to enhance our economic resilience and national security. The Bill will strengthen our position as a trusted hub for businesses to invest with confidence in a stable, safe, and secure Singapore.

Conclusion

18. Singapore must navigate the complexities of an evolving world. We will do so by continuing to deepen our networks and expand trade and investment flows, while also fortifying our domestic strategies to adapt to the growing economic-security nexus. Together, we will transform the challenges of today into the opportunities of tomorrow, so that we continue to grow our economy, and create good jobs for our people.

19. Thank you, and I look forward to an engaging discussion.